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Phoenix crashes and burns

Fairfax Media    |     5 December 2015

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Melbourne’s Phoenix Institute has shut down its “real world division” (that is, its face-to-face, classroom rather than online delivery) as a result of a federal government crackdown which has seen VET FEE-HELP funding to the entire sector frozen and legal action initiated by the ACCC. Some 260 transpersonal counselling and art therapy students are affected by the closure.

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Phoenix

 

The funding freeze could prompt a number of multi-million dollar college collapses as the government belatedly clamps down on an out-of-control sector that will cost it $4 billion or more this year.

Any unravelling is also likely to reveal that the sector’s insurance falls far short of what’s required to cover student debts to the government under the VET FEE-HELP scheme.

Phoenix Institute is insured for just $500,000 while its owners say it is owed $276 million by the federal government in unpaid VET FEE-HELP.

Phoenix is one of a large number of colleges to have grown exponentially through its sale of online diplomas around Australia, using government money under the VET FEE-HELP scheme.

It started the year claiming $200,000 per month from government to pay for courses, but by September, it was applying for a variation, claiming an annual payment of $300 million – or $25 million per month – a 125-fold increase.

However, the college has received no payment since August after questions began to be raised about its recruitment practices. The regulator, the Australian Skills Quality Authority, cancelled its registration, effective from 6 January 2016, and parent company Australian Careers Network has been at a trading halt since October.

Insurance is supposed to cover the cost of students’ relocation for training, or the cost of their debt to the government under the HECS-style loan scheme.

But one of two insurers for the industry, the Australian Council for Private Education and Training, admitted it had been caught short by the explosive, sales-driven growth in the industry this year.

“We’ve increased our premiums tenfold because of all this, but the fact is this sector grew incredibly fast, and nobody but the government knew how fast,” said chief executive Rod Camm.

“We had providers growing at vastly beyond the rate we expected.”

If insurance cannot cover the cost of courses or student debts when colleges close, taxpayers are likely to be left carrying the bill.

Separately, the Australian Competition and Consumer Commission (ACCC) has issued proceedings in the Federal Court against Phoenix Institute alleging false, misleading and unconscionable conduct by the provider and seeking recovery of up to $106 million in VET FEE-HELP payments..

Phoenix is strenuously defending itself against the allegations.

A spokesman for vocational education minister Luke Hartsuyker said existing students of Phoenix will receive help to be placed with another training provider, or receive a refund for incomplete study.

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